Independent Contractor Agreements: Should You Use Them In Your Internet Business?

Let’s make one thing clear. An independent contractor agreement should never be used in your Internet business to disguise an employer-employee relationship. If you get caught doing this with an employee, you could be held liable for payroll taxes and some nasty penalties. Simply not worth the risk.

If there truly is an independent contractor relationship, such as a work-for-hire web design gig for a single site, you’ll want a signed written independent contractor agreement in place to protect your legal rights.

Although the terms of an independent contracting agreement will vary depending upon the type of work to be performed and the unique circumstances surrounding the relationship, there are some general provisions that most of these types of contracts have in them in order to be binding (legally enforceable) in a way that offers you protection. These terms include:

• Scope of work
• Price (amount and time(s) of payment)
• Expense allocation (including any reimbursements)
• Deadline for completion
• Milestones (often tied to payment)
• Existence of an independent contractor relationship rather than employment
• Ownership of intellectual property rights for work created and protection of trade secrets
• Governing law and jurisdiction
• Alternative dispute resolution provisions

Your Internet lawyer can draft customized independent contractor provisions that are designed to protect your interests while keeping you out of court in case of  a dispute.

Clayton Makepeace, Troy White and Outsourcing

Troy White has posted at copywriter Clayton Makepeace’s site some good information about outsourcing to grow your business quickly. Let me weigh in on some of the legal issues.

As a preliminary matter, you should be very careful to distinguish between hiring employees and outsourcing to independent contractors. Many business owners who are non-lawyers will refer to “hiring” an independent contractor. That’s a mistake. If you’re going to outsource to an independent contractor, nothing you say or put in writing should suggest that the person doing the work on a freelance basis is actually an employee.

From a taxes and benefits standpoint, employees are a costly pain in the @ss. Unless you want to be responsible for Social Security contributions, workers compensation, and unemployment compensation, don’t hire employees.

In contrast, independent contractors are generally responsible for all of their own taxes (caveat – there may Read more